TaxTMI 
TaxTMI 
2017 (4) TMI 1268
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....961 (hereinafter the Act), being the share application money received by the assessee. The crux of argument advanced on behalf of the assessee is that the assessee duly filed the confirmation. It was explained that the addition was made by the Assessing Officer on the plea that no details were filed by the assessee. However, it was claimed that the necessary details were duly filed by the assessee and the whole addition was made on the basis of statements tendered by some person. It was pleaded that in spite of asking by the assessee, cross examination was not provided to the assessee. Our attention was invited to page-7 containing the reply of the assessee with a request for cross examination. It was claimed that the assessee is a public limited company, annual returns were filed with the registrar (pages 64 to 69 of the paper book). Details of allotted shares were duly filed with the Ministry of Corporate Affairs, as required under the Act (page-71 of the paper book). Our attention was also invited to the page-81 of the paper book containing the names of allottees by submitting that even all the details were duly made available to the Ministry of Corporate Affairs and also before....
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....khs. The assessment was reopened u/s 147 of the Act, therefore, notice u/s 148 of the Act was served upon the assessee. Notice u/s 143(2) dated 21/10/2014 was also served upon the assessee. In response to notice u/s 133(6) of the Act, dated 21/01/2015, M/s Alka Diamond Industries Ltd., vide communication dated 04/02/2015, submitted the details. As per the Revenue, part details were submitted. The stand of the Revenue is that the assessee could not prove the creditworthiness of the investing company as well as genuineness of the transaction of share application money, thus, the Ld. Assessing Officer, treated the amount of Rs. 20 lakh, as unexplained cash credit and added the same to the total income of the assessee u/s 68 of the Act. 2.4. On appeal before the Ld. Commissioner of Income Tax (Appeals), the factual matrix was considered and the addition made by the Ld. Assessing Officer was affirmed. Before adverting further, we are expected to reproduce the submissions of the assessee for analysis, which has been summerized in para 2.3.1 of the impugned order for ready reference:- 2.3.1 Ld. AR has, inter alia, submitted the following arguments: "The Appellant, in ....
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....rder dated 26.03.2015 under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 after making an addition of Rs. 20, 00,000/- under Section 68 of the Act. 4. The Ld. AO has erred on the following grounds: i. The Ld. A O. issued notices u/s 143(2) and 142(1) without providing reasons to the appellant for issuing notice uls 148. ii. The Ld. A.O. issued notice u/s 148 without any application of mind merely relying on the information received from the investigation wing. iii. The Ld. AO failed to appreciate that the appellant had discharged the primary onus cast upon the appellant of proving the genuineness of the party from whom share application money was received. iv. The Ld. AO ignored the supporting documentary evidences provided during the course of assessment proceedings and has acted merely on the basis of surmise and conjecture. v. The Ld. AO erred in passing the assessment order u/s 143(3) r. w.s. 147 of the Act without providing any opportunity to the appellant for cross examination which is against the principles of natural justice. 5. Failed to provide reasons for issue of notice u/s 148. The Hon'....
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.... and not suspect. The reasons to believe must be honest and not based on suspicion or conjecture. 7. Addition u/s 68 on account of share application money is unjustified. The Apex Court in CIT v. Lovely Exports (P) Ltd. (supra), has held that that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the assessing officer; then the department can always proceed against them and if necessary reopen their individual assessments. In the present case, the appellant has submitted the details of a/I the parties from whom Share application money was received during the impugned assessment year. In addition to the same, the appellant has also submitted the bank statement of M/s Yash V Jewels Ltd. along with the confirmation of M/s Yash V Jewels Ltd. And Mls Alka Diamond Industries Ltd. vide letter dated 26.03.2015. It is settled position of law that in the matter of cash credit, the initial onus lies on the assessee to prove the genuineness of the transaction alongwith the identify of the lender/investor and his creditworthiness. Having done so, the appellant in the instant case has d....
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....t is not disputed that the assessee has given the details of name and address of the shareholders, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the assessing officer to make proper investigation and reach the shareholders. The assessing officer did nothing except issuing summons which was ultimately returned back with an endorsement 'not tenable'. In our considered view, the assessing officer ought to have found out their details through PAN Card, Bank Account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the assessing officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in liminni with no order as to costs." 8. Failed to appreciate the documentary evidences provided during the course of assessment proceedings The Ld. AO merely relied on the information received from the investigation wing and overlooked the fact that the appellant had submitted the Confirm....
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....rt), concluded that the ingredients of section 68 were not established by the assessee and therefore, confirmed the addition. The assessee is aggrieved and is in appeal before this Tribunal. 2.6. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsels, if kept in juxtaposition and analyzed, we find that there are various judicial pronouncements, which are in favour and against the assessee. However, we are expected to examine the facts in a objective manner and then to apply the case laws after considering the facts in the present appeal and the cases relied upon by both sides. As per the Revenue, there was information received from the office of the DGIT (Inv.), Mumbai related to Mr. Pravin Jain & Ors. On 12/03/2014. As per the Ld. CITDR, there was information from the investigation wing that Mr. Pravin Jain along with his related concerns, was indulged in providing Hawala Entries. The statement of Shri Pravin Jain and Ors was recorded, wherein, they have admitted (as mentioned in para-2 of the assessment order also) that th....
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....ompany for purchase of the share. 2.7. As per the Revenue, M/s Alka Diamond Industries Ltd. submitted part details, vide letter dated 04/02/2015, whereas, the notice issued to M/s Yash-VJewels Ltd. was returned unserved as 'unclaimed'. Another notice was issued to the assessee on 26/03/2015 to which the assessee submitted the details which are summerized as under:- i. Bank statement of the assessee, where the money was deposited, ii. Confirmation from M/s Yash-V-Jewels along with number of shares applied and allotted, iii. Copy of Board Resolution passed, iv. Copy of ROC return filed, v. Copy of bank statement of M/s Yash-V-Jewels Ltd. reflecting the payment made for share application money. 2.8. The assessee further claimed that the payments on account of share application money was received through banking channel, board resolution was passed for investing the funds in the assessee company as share application. The Ld. Assessing Officer was of the view that the money received through banking channel is not sacrosanct as it does not prove the creditworthiness of the assessee company and addition was made and confirmed by the ld. C....
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.... (Del) 38 : (2007) 158 Taxman 440 (Del) wherein their Lordships have held that a distillation of the precedents yields following propositions of law in the context of s. 68. The assessee has to prima facie prove - (i) the identity of the creditor/subscriber (ii) the genuineness of the transaction, viz, whether it has been transmitted through banking or other indisputable channels (iii) the creditworthiness or financial strength of the creditor/ subscriber (iv) if relevant details of address or PAN Identity are furnished to the Department along with the copies of shareholder register, share application form, share transfer register etc, it would constitute acceptable proof or acceptable explanation by assessee. 2.11. Further, (i) the Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglect to respond the notices (ii) the onus would not stand discharge if the creditor/subscriber denies or repudiate the transaction set up by assessee nor should the AO take such repudiation on face value and construe it , without more evidence against the assessee (iii) the AO is duty bound to investig....
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....(Del)-share application money - Tribunal while observing details including confirmation details of bank account, PAN of subscriber and that payments made by cheque - justified in deleting addition under s. 68. Although the Lordships applied decision in Sophia Finance Ltd. (supra) they came to the conclusion that the scope is limited to examining the existence of shareholders and since the assessee has furnished sufficient material to discharge the onus, deletion of addition was correct. CIT vs Down Town Hospitals (P) Ltd. (2004) 267 ITR 439 (Gau) held that the assessee filed details regarding source of funds of the party and their Income-tax File Numbers etc - no addition under s. 68 is permissible where shareholders are identified and it is established that they had invested the money in purchase of shares. (pp. 127 to 131 of judgment compilation). CIT vs. ILLAC Investment (P) Ltd (2007) 207 CTR (Del) 687 : (2006) 287 ITR 135 (Del) held that assessee satisfactorily established identity of shareholders, the addition under s. 68 rightly deleted - no substantial question of law arises (pp. 146 and 147 of judgment compilation). Dy. CIT vs. Rohini Builders (2003) 182 CTR (Guj) 373 : (2....
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....oted that Hon'ble jurisdictional High Court in the case of CIT vs M/s Gangandeep Infrastructure Pvt. Ltd. (ITA No.1613 of 2014)(Bom.) on identical fact decided the issue in favour of the assessee. For ready reference and also claimed by the assessee, the facts of the case in M/s Gagandeep Infrastructure Pvt. Ltd. and that of the assessee are summarized hereunder:- 2.13. We find that in the aforesaid case, the Hon'ble jurisdictional High Court vide order dated 20/03/2017 held/observed as under:- "1. This Appeal under section 260-A of the Income Tax Act, 1961 (the Act) challenges the order dated 23' April, 2014 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 2008-09. 2. Mr. Suresh Kumar, the learned counsel appearing for the Revenue urges the following reframed questions of law for our consideration:- "(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition of Rs. 7,53,50,0001- under Section 68 of the Act being share capital/share premium received during the year when the Assessing Officer held the same as u....
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....credit tinder Section 68 of the Act. (c) Being aggrieved, the Revenue carried the issue in the appeal to the Tribunal. The impugned order of the Tribunal holds that the respondent-assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to its shares. The identity was established by the very fact that the detailed names, addresses of the shareholders, PAN numbers, bank details and confirmatory letters were filed. The genuineness of the transaction was established by filing a copy of share application form, the form filed with the Registrar of Companies and as also bank details of the shareholders and their confirmations which would indicate both the genuineness as also the capacity of the shareholders to subscribe to the shares. Further the Tribunal while upholding the finding of CIT(A) also that the amount received on issue of share capital alongwith the premium received thereon, would be on capital receipt and not in the revenue field. Further reliance was also placed upon the decision of Apex Court in Lovely Exports (P) Ltd. (supra) to uphold the finding of the CIT(A) and dismissing the Revenue's appeal. (d) Mr.....
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.... Hon'ble jurisdictional High Court in CIT vs Creative World Telefilms Ltd. (2011) 333 ITR 100 (Bom.) duly considered the decision in the case of Lovely Export Pvt. Ltd. (Supra) and it was found that the assessee had given the details like name and addresses of share holders, their PAN/GIR No., Cheque No., Name of the Bank, and thus the order of the Tribunal was upheld. Identically, in Vitrag Metals pvt. Ltd. vs Income Tax Officer (2016) 46 ITR (Trib.) 201 (Mum.) decided the issue in favour of the assessee. 2.15. It is well established principle of law that once the transaction has taken place through banking channels, the genuineness of transaction cannot be disputed, as the assessee is not required to prove source of a source. We are adding here that it is always not sacrosanct because the assessee has to satisfy the ingredients of section 68 of the Act. However, the facts clearly indicates that the assessee has discharged its primary burden because the identity of the share subscribers, their capacity and genuineness of the transaction is not in doubt. Reliance can be placed upon the ratio laid down in following decisions:- i. Sarogi Credit Corporation vs CIT 1975....
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....inguished/analyzed/considered the decision in Lovely Exports (P) Ltd. because it was merely dismissal of SLP. The ratio laid down in following cases can be placed reliance:- i. CIT vs. Oasis Hospitalities (P) Ltd. (2011) 238 CTR (Del) 402 : (2011) 51 DTR (Del) 74 : (2011) 333 ITR 119 (Del). ii. CIT vs. STL Extrusion (P) Ltd. (2011) 53 DTR (MP) 97 : (2011) 333 ITR 269 (MP). iii. Geoffrey Manners & Co. Ltd. (1996) 136 CTR (Bom) 169 : (1996) 221 ITR 695 (Bom); iv. Taylor Instrument Co. Ltd. vs. CIT (1999) 153 CTR (Del) 295 : (1998) 232 ITR 771 (Del); v. CIT vs. Mohanlal Kansal (1978) 114 ITR 583 (P&H); vi. Jorhant Group Ltd. vs. Asstt. CIT (2007) 289 ITR 422 (Gau) vii. CIT vs. Vrajlal Manilal & Co. (1980) 19 CTR (MP) 182 : (1981) 127 ITR 512 (MP). 2.19. Now, we shall analyze certain case laws, in CIT vs Lovely Export Pvt. Ltd. (2008) 216 CTR 195, the Hon'ble Apex Court observed as under:- "If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accorda....
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....o cross examine, in spite of repeated request made by the assessee, is concerned, the Hon'ble Apex Court in Andaman Timber Industries vs CCE 281 CTR 241 (SC), the Hon'ble Apex Court held as under:- "Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to crossexamine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. (para 6) Appellant had conteste....
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....6] 38 GSTR 117 (SC) (para CIT v. Ashwani Gupta [2010] 322 ITR 396 (Delhi) (para 9) CIT (Add!.) v. Bahri Bros P. Ltd. [1985] 154 ITR 244 (Patna) (para 9) CIT (Deputy) v. Rohini Builders [2002] 256 ITR 360 (Guj) (para 9) Hastimal (S.) v. CIT [1963] 49 ITR 273 (Mad) (para 9) Kishinchand Chellaram v. CTT [1980] 125 ITR 713 (SC) (para 9) Mather and Platt (India) Ltd. v. CIT [19871 168 ITR 493 (Cal) (para 9) Nemi Chand Kothari v. CIT [2003] 264 ITR 254 (Gauhati) (para 9) Ranchi Handloom Emporium v. CIT [19991 235 ITR 604 (Patna) (para 9) 2.22. If the totality of facts and the judicial pronouncements, discussed hereinabove, are analyzed, we are of the considered opinion that the onus caste upon the assessee, as provided u/s 68 of the Act, has been duly discharged by the assessee as the identity of the share subscribers, creditworthiness and genuineness of the transaction is not in doubt or it can be said that the same has been proved/explained by the assessee. Now, The onus has reverted back upon the Revenue to prove otherwise. The Ld. Assessing Officer merely relied upon the information received from the investiga....
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....ntiated with facts. The information may and may not be correct. For fastening the liability upon anybody, the Department has to provide the authenticity of the information to the person against whom such information is used. The principle of natural justice, demands that without confronting the assessee of such evidence, if any, or the information, no addition can be made. Even otherwise, as per Article-265 of the Constitution of India, only legitimate taxes has to be levied and collected. In our humble opinion, the assessee has duly discharged the onus caste upon it, therefore, respectfully following the decisions from Hon'ble Apex Court, Hon'ble High Courts and Hon'ble jurisdictional High Court, we reverse the order of the Ld. Commissioner of Income Tax (Appeal), resultantly, this ground of the assessee is allowed. Finally, the appeal of the assessee is partly allowed. This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 19/04/2017. ============= Document 1 Before the Hon'ble Income Tax Appellate Tribunal 'A' Bench, Mumbai M/s Arceli Realty. Ltd. Assessment Year: 2007-2008 ....